The first quarter of fiscal year 2025 was a subdued period for state finances going by the own tax revenues of the top states during the period.

Analysis of provisional figures of own tax revenue (SOTR) of the top 10 states based on GDSP shows a growth of an average 8 per cent year-on-year from same quarter last year. The rate of growth in SOTR for the same states from Q1FY23 to Q1FY24 was 12 per cent.

Even as growth rate in state GST was subdued likely due to the Lok Sabha elections slowing down consumption, stamp duty and registration fees grew faster for most states and helped bring up SOTR.

Maharashtra recorded the highest growth in total SOTR during Q1 at 15.5 per cent with ₹81,152 crore in own tax revenues, as per provisional figures in CAG state accounts.

UP at ₹70,131 crore grew its SOTR at 12.4 per cent. Karnataka and Tamil Nadu made up third and fourth spot respectively in terms of SOTR with 9.9 per cent and 3.2 per cent YoY growth respectively.

Gujarat’s SOTR could not be analysed since the state has not filed June data with CAG yet. In FY24, Gujarat was at fifth spot in terms of SOTR.

SOTR includes revenues earned through State GST, Stamp & Registration, Sales Tax, State Excise, and Land revenue and is an indicator of state’s ability to raise finances. Overall, the centre’s gross tax revenue for Q1 stood at ₹8.3 lakh crore, up 23.6 per cent from same period in FY24.

Component-wise analysis of the tax revenue of top five states shows that GST revenue grew highest for Maharashtra and UP at 12 per cent and 14 per cent respectively.

Telangana grew GST at 10 per cent and Karnataka at 8 per cent. Tamil Nadu saw a 11 per cent fall in GST revenue. Analysts note that SGST typically depends on not just the size of the population but also the economic purchasing power and consumption of high value goods. The GST revenue collection of Tamil Nadu in Q1 FY25, as per GST statistics, stands at ₹32,196 crore, a 7 per cent increase YoY.

However, a robust commercial and luxury real estate sector and recent hikes in levies by states has aided collections in another key component.

Karnataka and Tamil Nadu, two states that hiked stamp duty and registration charges in the last one year, grew tax revenue in this segment by 40 per cent and 14.8 per cent respectively.

Stamp duty & registration constituted 12 per cent and 13 per cent of total SOTR for the two states. Maharashtra was another top gainer with YoY growth in stamp duty & registration at 22 per cent. 

Given GST is beyond their control, many states have been eyeing other such levers to increase revenue including sales tax and excise duties on liquor. Sales tax also saw subdued growth with YoY growth rates ranging from 3 per cent to 9 per cent for top states.

Paras Jasrai, Senior Economic Analyst, India Ratings & Research, says that the trend so far this fiscal indicates that it is the states with high consumption activity which are driving the SOTR growth.

“But the divergence across states could be due to the election period,” he added. India Ratings analysis pegs overall SOTR growth during Q1 of 21 states (for which data is available) at around 11% YoY.

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